Signs of deeper change: Labor organization and regulation in China

Changes in labor organization and regulation in China are providing a unique perspective on China's systematic move up the production ladder and its embrace of higher-skilled industries.

In a landmark agreement, employees of a Wal-Mart outlet in Shenyang, capital of Liaoning Province in northeastern China, last week signed a collective labor contract with the retailing giant. Under the agreement, employees' salaries will be raised by an annual rate of 8 percent in 2008 and 2009, and standards for minimum pay, paid vacation, social security and overtime pay were agreed to. The International Labor Rights Fund (ILRF) Blog has hailed the contract as a stepping stone for Walmart's ongoing labor organizing efforts in China (as well as for its influence on the All China Federation of Trade Unions), the successes and challenges of which China Labor News Translations have been documenting at length.

The ILRF Blog has pointed to draft labor regulations proclaimed in Shenzhen in June as evidence of the persisting trend towards collective bargaining and legislation in China; and this trend, in turn, as an indication of China's growing conviction that it must move up the production ladder, focusing on higher-skilled industries - or be stuck forever competing with its poorest neighbors for the cheapest manufacturing orders.

The IHLO (Hong Kong Liaison Office for the international trade union movement) in June investigated the impact of the Labor Contract Law in the preceding six months of implementation, and concluded that the real impact of the new law has not been its negligible overall impact on labor costs, but rather the way it makes it harder for companies to avoid paying benefits to their employees or to circumvent implementing existing labor legislation. And this encapsulates government policies aimed at transforming China's traditional reliance on low-cost labour and labour-intensive industries to the development of higher-value industries. This process requires companies to invest in employee training, and makes it harder to routinely flout labor regulations. With such incremental developments, the organizational and regulatory outlook for labor in China provides ongoing insight into more long term transformations in the Chinese economy.

2 Comments

Paying more for labor than it's worse has absolutely nothing to do with higher value of anything. Basic economics, folks. Those labor regulations are flaunted because they're silly.

What a joke this statement is:

"...it must move up the production ladder, focusing on higher-skilled industries - or be stuck forever competing with its poorest neighbors for the cheapest manufacturing orders."

It already HAS by virtue of the freedom that has been introduced by market reforms. This happens naturally -- BECAUSE of market freedoms, not DESPITE them. Indeed, living standards will continue to rise in China, and even in Shenyang, but not because of them... sadly, it will be despite the regulations. But for them, living standards would no doubt be more sustainable and better in the long-run.

I fail to see however how new labour regulations can be described as silly when they are intended to protect and enhance labor rights and increase people's quality of life and social stability. Are you saying that 600 million people have been lifted out of poverty since 1978 entirely DESPITE government regulation? In 2006, moreover, 40% of china's exports were classified as high tech, and according to OECD statistics China became the second highest investor in R&D by the end of 2006. You seem to attach undue importance to market freedoms, yet in China politics, business and markets are inextricably linked. In any case this posting did not soeak of the role of the market as such, but rather of the way labour regulation and organization in China is changing to reflect the growing appreciation for higher skilled industries.